Along a short-run Phillips curve, suppose the expected inflation rate is 6 percent. If the inflation rate turns out to be 8 percent instead,
A) there is a movement downward along the short-run Phillips curve.
B) there is a movement upward along the short-run Phillips curve.
C) there is a downward shift of the short-run Phillips curve.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

If the actual inflation rate is higher than the expected inflation rate, it means there is an upward pressure on prices, leading to an increase in inflation. This results in a movement along the short-run Phillips curve in an upward direction. Therefore, option B is the correct answer.

Along a Short-Run Phillips Curve, Suppose the Expected Inflation Rate